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Lemon Tree Hotels and Warburg Pincus enter into a JV of Rs 3,000 crore to form a co-living platform

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Lemon Tree Hotels, India’s largest hotel chain in the mid-priced sector has formed a JV with an affiliate of Warburg Pincus, a leading global private equity firm focused on growth investing, to create a co-living platform. The JV marks Lemon Tree Hotel’s entry into an adjacent but new business segment focusing on the development of institutional-grade rental housing accommodation serving both students and young working professionals across major educational clusters and key office markets in India.

Following Warburg Pincus’ successful partnerships in China and Hong Kong, with entities such as Mofang, Nova, Ziroom and Weave, this investment represents the first co-living platform which the firm has backed in India. An affiliate of Warburg Pincus and Lemon Tree Hotels Limited will hold 68 per cent and 30 per cent stake, respectively in the JV, with the balance 2 per cent to be held by Patanjali (Patu) Keswani, founder, chairman and managing director, Lemon Tree Hotels Limited.

The JV partners will initially invest Rs. 1,500 crore in equity over a period of time followed by an additional infusion of Rs. 1,500 crore in equity at the option of the partners, to develop rental housing projects through a combination of greenfield purpose-built properties, refurbishment of existing under-managed, stressed commercial and residential assets taken on lease or acquisition basis as well as management of existing for-rent accommodation projects. The platform aims to provide affordable and conveniently located co-living spaces for students and young professionals, who are increasingly looking to be part of a vibrant community with like-minded individuals. The JV’s projects will also include shared spaces like living room, gym and well-equipped cafeterias in order to provide its residents with a high-quality and full-service co-living accommodation.

The JV has developed a pan-India strategy and is building a dedicated team to execute its plan, making it one of the very few players with a combined focus across student housing and young professional co-living segments, while undertaking customised developments to meet the evolving needs of the millennial population in India.

Commenting on the formation of the JV, Keswani, said, “We are delighted to once again partner with Warburg Pincus at an early stage of this exciting new business opportunity, which will allow Lemon Tree Hotels to move into a segment which is nascent but closely aligned to our existing target customers and which is expected to see tremendous growth, going forward. Driven by the lack of quality accommodation and high rental/capital costs across key Indian cities relative to salary levels, the rise of co-living spaces is a part of the evolution of the sharing economy that will continue to gain significant traction. Our purpose-built developments will offer efficient and community-oriented living solutions in a hassle-free environment for our residents through a combination of unique product design and diversified service offerings. We look forward to working closely with Warburg Pincus and leveraging their successful experience in helping create market leading platforms in the shared accommodation space in other parts of Asia.”

Anish Saraf, managing director, Warburg Pincus, said, “India has a large addressable rental population across students and young professionals which is expected to grow significantly as a result of rapid urbanization, increasingly unaffordable housing prices/rentals and shortage of on-campus housing infrastructure. Moreover, this millennial population desires modern housing facilities with a sense of community living, which is missing in existing accommodation offerings. We are excited to partner for a second time with Patu and his team and believe that this JV is well-positioned to become a leading for-rent accommodation provider in India, given its access to significant capital as well as support from Lemon Tree Hotel’s proven design/development capability and existing on-ground infrastructure across the country. We look forward to working with Lemon Tree Hotels to build a best-in-class team and scale-up the platform as well as build a strong consumer brand in the Indian co-living space.”

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